The purpose of this advisory is to highlight changes that should be considered for the constitutional documentation of UK companies (including UK subsidiaries of US entities) in light of the final stage of implementation of the UK Companies Act 2006 (the “2006 Act”). The 2006 Act has now been fully implemented with the final remaining provisions (with some minor exceptions) effective as of 1 October 2009. These provisions include:
Why should existing articles be amended?
There is no legal requirement that a UK company must update its articles, and a company may continue to operate after 1 October 2009 under its existing constitution. However, updating the articles of association would allow a company to:
Amending the articles could clearly therefore have significant benefits for a UK company.
One option open to an existing UK company is to adopt the new model articles in their entirety in place of its current articles. However, the model articles have been designed for small, owner-managed businesses and may not be suitable for all private companies. Furthermore, the model articles do not contain many of the provisions that companies may wish to have in their articles, such as:
We would therefore recommend that directors review (in conjunction with legal advisers) the articles of their company to determine if they should be amended for any of the reasons discussed above. It is likely that in most cases a less drastic option than adopting wholesale the model articles would be appropriate, i.e., the company could choose to amend some individual articles to take advantage of the deregulatory provisions of the 2006 Act where appropriate.